Fibocom Wireless Inc. (00638) has announced a strategic move to streamline its business focus by converting its outstanding loans to subsidiary Shanghai Guangyi into equity, terminating the unit's equity incentive scheme, and subsequently selling its entire stake. The decision was formally approved at the company's fourth board meeting of the twenty-ninth session held on August 20, 2026.
The board sanctioned a debt-to-equity swap for Shanghai Guangyi Intelligent Connectivity Technology Co., Ltd., in which Fibocom holds a direct 77% stake. This subsidiary, which operates in the intelligent connected solutions business, has required substantial research and development investment and is still in a phase of scaling operations and enhancing capabilities. To better concentrate on its core business activities, Fibocom is orchestrating a change in control for Shanghai Guangyi. As of the debt settlement date of June 30, 2026, Fibocom had provided cumulative loans totaling RMB 278.81 million to the subsidiary.
To effectively reduce Shanghai Guangyi's overall debt burden and facilitate the smooth completion of the control change, the board agreed to increase capital in the subsidiary by converting existing receivables into equity. The capital increase amounts to RMB 275 million, sourced entirely from the aforementioned debts owed by Shanghai Guangyi. The subsidiary's employee shareholding platforms, Ningbo Guangyi Enterprise Management Partnership (Limited Partnership) and Ningbo Guangxing Enterprise Management Partnership (Limited Partnership), have waived their pre-emptive rights in this capital increase. Following the completion of this debt-to-equity conversion, Fibocom's capital contribution to Shanghai Guangyi will rise from RMB 20 million to RMB 295 million, increasing its direct shareholding from 77.00% to 98.02%.
Given the planned control change, the board agreed to terminate the implementation of the equity incentive plan for Shanghai Guangyi, in line with the stipulations of the plan's draft. Consequently, any equity not yet vested will not be eligible for vesting. For equity that has already vested, the exit process will be negotiated amicably after the transaction's closing, in accordance with the relevant terms of the incentive plan draft and equity incentive grant agreements, with the exit amount capped by these provisions. Following the transaction's completion, the employee shareholding platforms, Ningbo Guangyi Enterprise Management Partnership and Ningbo Guangxing Enterprise Management Partnership, are slated for business deregistration.
Furthermore, the board has approved the signing of a share transfer agreement with Luxshare Precision Industry Co., Ltd. for the acquisition of 100% of Shanghai Guangyi's equity. This agreement involves Fibocom, its wholly-owned subsidiary Shenzhen Fibocom Investment Development Co., Ltd. (acting as the executive partner of the employee platforms), and the two Ningbo partnerships, all selling their combined 100% stake (based on post-conversion shareholding ratios) to Luxshare. The base transfer price is set at RMB 120 million, subject to adjustment based on Shanghai Guangyi's net assets at the closing date. If the closing date net assets are equal to or exceed RMB 60.9 million, the final price remains at the base; otherwise, it will be reduced by the shortfall between RMB 60.9 million and the actual net asset value. The share transfer agreement was formally executed on August 20, 2026.
The debt-to-equity swap and the termination of the equity incentive plan serve as preconditions for the share sale's closing. This transaction will cause a change in the scope of Fibocom's consolidated financial statements, as the company will no longer hold any equity in Shanghai Guangyi, and the subsidiary along with its sub-subsidiaries will be deconsolidated. For a period of two years from the transaction's closing date, Fibocom and its branches, wholly-owned subsidiaries, and holding subsidiaries are restricted from engaging, directly or indirectly, in any business with Shanghai Guangyi's relevant clients that competes or may compete with the industrial handheld business.
Shanghai Guangyi primarily operates an ODM business for industrial handheld terminals. Since its establishment in 2020, it has continuously invested in product research and development, technological accumulation, and market expansion. Due to its developmental stage and significant upfront R&D costs, it is still in a growth phase. Meanwhile, Fibocom has been actively expanding its IoT solutions business. After careful consideration, the company decided to pursue this restructuring to optimize resource allocation and sharpen its strategic focus on core operations.
The acquirer, Luxshare, possesses strong capabilities in precision manufacturing, smart manufacturing, supply chain management, automated production, and global delivery. Looking ahead, Shanghai Guangyi is expected to achieve complementary advantages with Luxshare in product R&D and market expansion for its industrial handheld ODM business, fostering its sustainable growth. The two-year non-compete clause aligns with standard commercial practices. This transaction is designed to help Fibocom consolidate resources and concentrate on its primary business, enhance overall operational efficiency, and support its long-term development strategy. It is deemed to be in the best interests of the company and its shareholders, with no circumstances that would harm the interests of the company or its minority shareholders. The completion of this transaction is anticipated to positively impact the company's operating performance for the current year, with final figures subject to audit results. Post-transaction, Fibocom will cease to hold any stake in Shanghai Guangyi, which will be excluded from its consolidated reporting.